It also gave its long-term corporate credit rating a "negative outlook," meaning a possible further downgrade for Tata Motors, which recently launched the Nano, the world's cheapest car that retails for just over 2,000 dollars.

"We lowered the rating on Tata Motors to reflect the challenging operating performance at Jaguar and Land Rover for the year ended March 31, 2009, and our expectations of a similar operating performance in fiscal 2010," said Standard & Poor's credit analyst Suzanne Smith.

"This, along with a high debt level, has placed significant pressure" on Tata Motors' finances," Smith said in a statement.

The downgrade came as Britain's Observer newspaper reported that Tata was close to agreeing a financial aid package with the British government for Jaguar Land Rover (JLR) after a year of difficult negotiations.

Tata Motors announced a surprise 58 percent jump in first-quarter net profit to 5.13 billion rupees (105 million dollars) last week, helped by a change in its accounting policy.

But the company still has to announce consolidated financial results for the first quarter of the financial year that would include its loss-making JLR subsidiary.